Spending on natural gas extraction in the Haynesville Shale has stuffed so much money in the pockets of some Louisianans that it is akin to winning the lottery, suggests a recent analysis prepared for the Louisiana Department of Natural Resources (DNR).
The analysis, prepared by economic consultancy Loren C. Scott & Associates of Baton Rouge, LA, looked at spending by seven of 17 firms engaged in extracting gas from the Haynesville Shale during 2008. Their activities generated about $2.4 billion in new business sales in Louisiana, the analysis found.
"New business sales in turn created new household earnings for residents of the state," the report said. "As a result of these activities, nearly $3.9 billion in household earnings was created in 2008. This estimate includes both direct and indirect earnings and includes almost $3.2 billion in lease and royalty payments to private landowners."
The Haynesville is located primarily in the North Louisiana parishes of Caddo, Bossier, DeSoto and Red River.
About 70%, or $3.2 billion, of the spending by the seven firms was in the form of mineral lease and royalty payments. "Thus, the impacts on business sales, household earnings and jobs arise in large measure from the expenditures made by these lease owners," the report said.
The report goes on to note that conventional wisdom among economists is that households spend the equivalent of about 5% of their wealth per year, based on traditional measures of wealth such as home values, savings, etc.
"The studies do not contemplate massive increases in a household's wealth due to royalties and lease payments (equivalent in this case to winning the lottery)," the report said. "Unfortunately, we are not aware of any studies that measure the amount of money that households spend from lottery winnings, so we use the 5% value to calculate the impacts on sales, earnings and jobs...The actual impacts are likely to be substantially higher."
The study report is available at www.dnr.louisiana.gov/haynesvilleshale under "New Reports" and "The Economic Impact of the Haynesville Shale on the Louisiana Economy in 2008."
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